Blame globalization?

Chris Dillow is right about one thing: citing globalization as the reason for the success of Donald Trump’s campaign, especially among working-class voters, “suits some people very well for foreigners to get the blame rather than for inequality and the health of capitalism to come under scrutiny.”

But that doesn’t mean that, alongside many other factors (from the decline in labor unions to increasing automation), globalization—to be precise, capitalist globalization—doesn’t deserve some good share of the blame.

There are two main ways the U.S. working-class is affected by globalization: in terms of jobs and in terms of consumption.

As far as jobs are concerned, the combination of cheap imports (e.g., toys and garments) and outsourcing (e.g., to produce motor vehicles and electronics) has led to the reallocation of workers away from high-wage manufacturing jobs into other sectors and occupations, with large declines in wages among workers who have been forced to have the freedom to switch. Those effects are pretty straightforward, at least in terms of the research of Avraham Ebenstein, Ann Harrison, and Margaret McMillan.*

What about the cheaper goods workers can buy? The argument that is usually invoked to counter the negative effects on jobs and wages is that workers can now purchase less expensive goods (e.g., at big-box and dollar stores), thereby increasing their consumption.

Here’s Dillow:

For one thing, cheap imports should help workers. If you’re spending $5 on a Chinese T-shirt rather than $10 on a US-made one, you’ve got $5 more to spend on other things. That should increase demand and jobs.

That may be true in the short run, since with the same nominal incomes workers can add other items to their consumption bundle.

But what Dillow and others miss is the fact that, as the prices of items in the wage bundle decline (and without an ability to defend the value of their customary standard of living), the value of workers’ labor power also has a tendency to decline. As a result, employers have to pay less to get access to laborers’ ability to work—and their profits rise.

Considering both jobs and consumption, members of the U.S. working-class—many of them voters in Pennsylvania, Ohio, Michigan, and Wisconsin—correctly understood they were under assault by the forces of globalization.

The fact that U.S. workers have, in recent decades, been negatively affected by globalization doesn’t mean either adopting a nationalist stance or ignoring all the other factors. Nationalism (e.g., in terms of erecting protectionist barriers to trade) just pits workers in one country against those in other countries and doesn’t, within any country including the United States, solve the problem of workers getting the short end of the economic stick. And, certainly, we need to look at all the causes of workers’ current plight, from deteriorating real minimum wages to skill- and power-biased technological change.

However, globalization as it is currently configured has been one of the strategies employers have been able to use to discipline and punish workers, increasing both inequality and insecurity.

Globalization is therefore at least in part to blame for Trump’s victory.

*Even those who, like Gary Clyde Hufbauer and Tyler Moran, want to argue that, through the “prosperity effect,” globalization has made a positive contribution to average wages, are forced to admit that “Richer households did enjoy a disproportionate share of benefits from globalization, because of their dominant claim on corporate profits and proprietors’ incomes and the very small impact of foreign competition on the wages of highly skilled workers.”

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